Bloomberg News

Sony Reviewed for Possible Downgrade at S&P on Weak Earnings

November 07, 2011

(Updates with share prices in fourth paragraph.)

Nov. 4 (Bloomberg) -- Sony Corp. had its credit rating put on review for a possible downgrade at Standard & Poor’s because of weakening earnings at its TV business and the effects from purchasing Ericsson AB’s stake in their phone venture.

The “A-” long-term corporate credit and senior unsecured debt rating may be downgraded one rank, S&P said in a statement today, while affirming the “A-2” short-term rating for Tokyo- based Sony. “A-” is the seventh of S&P’s 10 investment grades.

“The likelihood of Sony’s weak earnings persisting has increased as there are no signs of a halt to the deterioration in the earnings of the company’s core flat-panel TV business,” S&P said. “In addition, Sony’s financial burden is likely to increase in tandem with the company making Sony Ericsson a wholly owned subsidiary.”

Sony shares tumbled 7.9 percent to close at 1,400 yen in Tokyo trading today, the lowest in 24 years. Shares have fallen 52 percent this year, compared with a 14 percent decline in the benchmark Nikkei 225 Stock Average.

Earlier this week, Japan’s largest consumer-electronics exporter forecast its fourth consecutive annual loss and slashed television sales targets after the yen reached a postwar high and floods in Thailand cut production.

Moody’s Rating

Sony also cut its annual sales forecast for personal computers, compact cameras and Blu-ray DVD players. JPMorgan Chase & Co. lowered its11 investment recommendations for Sony after the annual loss forecast.

“The fundamental issue is not external factors, but rather the need to create products and a business model that can differentiate Sony from the competition,” Yoshiharu Izumi, an analyst with JPMorgan Chase, said in a report.

Moody’s Investors Service said last week it was considering lowering its “A3” rating for Sony after the company said it would buy out Ericsson’s stake in their venture for 1.05 billion euros ($1.5 billion).

The maker of Bravia TVs is taking a 50 billion yen ($641 million) charge for streamlining its main TV operation, which is estimated to lose 175 billion yen this fiscal year, the eighth consecutive loss at the unit, Sony said Nov. 2.

--Editors: Anand Krishnamoorthy, Michael Tighe

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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